2017 (10) TMI 56 - AT - Income Tax

Penalty u/s 221(1) - non-payment of self-assessment tax under section 140A at the time of filing an income tax return which has been revised subsequently - Held that - The assessee is, in principle, covered by the scope of the penalty under section 221(1) of the Act in a case in which the though the assessee has not paid the admitted tax liability under section 140A, while filing the original return of income, the assessee subsequently pays the tax on the revised return of income, at the time of filing the revised return of income. We, therefore, answer the question referred to the special bench in affirmative and against the assessee. However, whether the penalty under section 221(1) r.w.s. 140A(1) is actually leviable on the facts of a particular case or not will depend on the facts of that case and depending on, inter alia, the factual finding as to whether or not the default of the assessee was for good and sufficient reasons- something with which we are not really concerned at this stage due to inherently limited scope of the question before the special bench. The matter shall now go back to the division bench for giving effect to our above observations and for deciding the matter afresh in the light of, inter alia, the above stated legal position. Pronounced in the open court today on the 26th day of September 2017.

Summary

Issues Involved:
1. Whether an assessee is liable to penalty under section 221(1) of the Income Tax Act, 1961 for non-payment of self-assessment tax under section 140A at the time of filing the original income tax return, even if the tax is paid while filing a revised return of income.

Detailed Analysis:

Background:
The issue arose from conflicting decisions by different benches regarding the applicability of Section 221(1) for non-payment of self-assessment tax under Section 140A when the original return is subsequently revised and the tax is paid. The assessee, a public company, filed its original return on 30th September 2008, declaring a taxable income of ?44,69,33,790 and claimed to have paid self-assessment tax, which was later found to be incorrect. The company revised its return on 21st May 2009, declaring a lower income and paid the self-assessment tax at that time. The Assessing Officer imposed a penalty of ?50,00,000 for non-payment of self-assessment tax at the time of filing the original return, which was upheld by the CIT(A). The matter was referred to a Special Bench due to conflicting decisions.

Preliminary Issue:
The Special Bench had to decide whether to address only the specific question referred to it or to consider the entire appeal. It was decided to limit the scope to the specific question of whether penalty under Section 221(1) can be imposed for non-payment of self-assessment tax at the time of filing the original return, even if the tax is paid while filing a revised return.

Submissions by the Assessee:
The assessee argued that the revised return, which was filed within the permissible limit and was bonafide, replaces the original return. Therefore, the penalty for non-payment of self-assessment tax at the time of the original return should not be imposed. The assessee cited several judicial precedents to support the view that a revised return substitutes the original return for all purposes, including the assessment of income and related claims. The assessee also argued that the penalty under Section 221(1) is for an event-specific lapse and not a time-specific lapse, and since the tax was paid at the time of filing the revised return, the penalty should not be imposed.

Stand of the Revenue:
The Revenue opposed the assessee's submissions, arguing that the default in payment of self-assessment tax at the time of the original return is not rectified by the subsequent filing of a revised return and payment of tax. The Revenue emphasized that the penalty is for the lapse at the time of filing the original return, and subsequent actions do not exonerate the assessee from the penalty. The Revenue cited judicial precedents to support the view that penalty under Section 221(1) is leviable even if the tax is subsequently paid before the initiation of penalty proceedings.

Rejoinder by the Assessee:
The assessee reiterated that the penalty is for non-payment of admitted tax liability at the time of filing the return and that the revised return, which replaces the original return, should be considered for this purpose. The assessee distinguished the judicial precedents cited by the Revenue, arguing that they were not applicable to the specific context of penalty under Section 221(1) for non-payment of self-assessment tax.

Analysis:
The Special Bench analyzed the statutory provisions of Sections 140A(1) and 221(1) and concluded that the default triggering the penal liability under Section 221(1) is the default in making payment of tax at the time of filing the original return. The filing of a revised return does not obliterate the default committed at the time of the original return. The judicial precedents cited by the assessee were found to be relevant to the assessment of income and related claims but not to the penal consequences for the default in payment of self-assessment tax. The Bench emphasized that the subsequent payment of tax does not affect the penal consequences under Section 221(1).

Conclusion:
The Special Bench concluded that the assessee is liable to penalty under Section 221(1) for non-payment of self-assessment tax at the time of filing the original return, even if the tax is paid while filing the revised return. The matter was remanded to the division bench for further proceedings based on this legal position.

Final Judgment:
The Special Bench answered the question in the affirmative and against the assessee, holding that the penalty under Section 221(1) is applicable for non-payment of self-assessment tax at the time of filing the original return, irrespective of the subsequent payment at the time of filing the revised return. The case was sent back to the division bench for further proceedings.